Thursday 27 October 2011

The House met at half-past Ten o’clock

Prayers

[Mr Speaker in the Chair]

Business before questions

Bank of Ireland (UK) plc Bill

Oral Answers to Questions

Business, Innovation and Skills

The Secretary of State was asked—

Royal Mail

1. Michael Connarty (Linlithgow and East Falkirk) (Lab):
What recent progress he has made on securing private sector investment in Royal Mail. [76849]

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):
As I made clear during the passage of the Postal Services Act 2011, we are taking a staged approach to its implementation. Before decisions can be taken on private sector investment, the regulatory regime must be reformed and the Government must secure approval to take on Royal Mail’s historical pension deficit and restructure its balance sheet. Progress is being made in these areas, alongside Royal Mail’s progress with its modernisation plan.

Michael Connarty:
I thank the Minister for his reply. Will he therefore tell the House exactly how much the Government value the assets in the Post Office pension fund at this moment, how much will be transferred to the Treasury and what will be left in the assets of the pension fund thereafter?

Mr Davey:
The hon. Gentleman will know, having been in the House a long time, that we would not make a valuation while working with the European Commission to secure state aid clearance. Until we get that, those sorts of calculations would be completely inappropriate.

Lorely Burt (Solihull) (LD):
As part of the deregulation process prior to the sale, we can expect a reasonable rise in stamp prices, which are currently the second lowest in Europe, despite the fact that we have the highest delivery specification. Does my hon. Friend agree that it is ironic

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that the Labour party now criticises us for remedying the problems that it created through its regulation procedures?

Mr Davey:
During the passage of the Postal Services Act, we heard a lot of criticism of the regulatory regime that the Labour party put in place. We put in a much stronger regime, which has been greatly welcomed.

Manufacturing

2. Mr Marcus Jones (Nuneaton) (Con):
What steps he is taking to support manufacturing. [76850]

14. Nigel Mills (Amber Valley) (Con):
What steps he is taking to support manufacturing. [76867]

15. Graham Evans (Weaver Vale) (Con):
What steps he is taking to support manufacturing. [76868]

The Secretary of State for Business, Innovation and Skills (Vince Cable):
As part of rebalancing the British economy, we are taking steps to support manufacturing in the UK by encouraging high levels of business, innovation, investment, exports and technical skills. I set out our strategy for achieving that in a talk to Policy Exchange yesterday.

Mr Jones:
From recent discussions with several representatives of our largest manufacturing companies, it is apparent that they are now looking actively to bring more UK supply manufacture back to our country, but they seem to question whether some of our small and medium-sized enterprises have sufficient capacity or investment to meet the growth in demand in this area. What can the Government do to help facilitate the right conditions to help some of our SMEs meet this increasing demand?

Vince Cable:
The hon. Gentleman is right to say that there is a supply chain issue. We are hearing good news from the automobile and aerospace sectors, with the large primes, such as Tata, Rolls-Royce and Airbus, making large investments. However, we also need to attract back the supply chains, which is already happening, particularly in the car industry. We have bodies that co-operate with industry in both those sectors: the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk) chairs one of them and I chair the other. We are therefore working actively with industry to attract the supply chains back to the UK.

Nigel Mills:
Will the Secretary of State join me in congratulating the work of the high-value manufacturing technology and innovation centre, which has had a display in Parliament for the past two days, and especially a business in my constituency, Advanced Composites, on the work that it does as part of that? Does he agree with the strategy and aims that it has set out, especially on having a strategy for how we can get manufacturing back to being 20% of gross domestic product by 2020?

Vince Cable:
Yes, we are fighting a historical trend, because, under the previous Government, and certainly over the past decade, manufacturing contracted as a share of the economy more rapidly than in any other

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western country and we lost a third of the work force. We have to retrieve that, and one of the main ways of doing so is through promoting innovation. The first innovation centre, as my colleague rightly points out, is the manufacturing technology innovation centre, which has seven campuses. Composites is one of those core technologies being developed, which I very much welcome.

Graham Evans:
Does my right hon. Friend agree that if we are effectively to support manufacturing, we need to ensure that our future work force have the necessary skills? Will he join me in welcoming the approval of Sandymoor free school in my constituency, which is receiving support from the nearby Daresbury science and innovation campus and which will help to achieve this goal?

Vince Cable:
Skills are obviously critical, and no doubt my hon. Friend the Minister for Further Education, Skills and Lifelong Learning will say more about the big increase in the number of apprenticeships shortly. I am sure that the school in my hon. Friend’s constituency will contribute to this at an early stage of development. Apprentices are a real success story and we are certainly going to build on it.

Mr Dennis Skinner (Bolsover) (Lab):
One way to increase manufacturing growth would undoubtedly be for the Business Secretary to turn his attention to Markham Vale. I cadged about £32 million off the then Chancellor of the Exchequer in the Labour Government to flatten the pit tips and build a vast industrial estate straight off junction 29A on the M1, and what has happened? There have been grey, miserable clouds hanging over Markham Vale ever since this tin-pot Government came to power. Why don’t you pull your finger out? We were spending money while the sun was shining; there is none being spent now.

Vince Cable:
I would certainly be happy to visit Markham Vale at some point and talk those things through with the hon. Gentleman. His area has a local enterprise partnership and has had an opportunity to put in a bid for an enterprise zone or the regional growth fund. I do not know what it has done, but I am certainly happy to talk to him.

I know that the hon. Gentleman is a long-standing Member and I am sure that he has followed the changes in attitudes towards manufacturing in this House under different Governments. He will be interested in the leader of the Labour party’s new distinction between “predators” and “producers”. What is troubling a lot of us on the Government Benches is why a party of dinosaurs is so opposed to predators. Perhaps the hon. Gentleman can explain.

Mr David Hanson (Delyn) (Lab):
Companies in my constituency that manufacture construction products, quarry materials for concrete or build materials for the construction industry have very much welcomed the plan announced by my right hon. Friend the Member for Morley and Outwood (Ed Balls) to bring forward infrastructure projects in order to increase employment and build manufacturing capacity in the United Kingdom. Given falling growth and rising unemployment, would it not be prudent for the Business Secretary to support that plan?

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Vince Cable:
Infrastructure is certainly a key to recovery, and it is absolutely right to put it on a sustainable basis. The Chief Secretary announced a programme for urgent modest-scale infrastructure projects a few weeks ago, and other infrastructure projects will be announced in the regional growth fund imminently.

Mr Iain Wright (Hartlepool) (Lab):
In answer to questions to his Department in June, the Secretary of State said:

“There is rapid growth now beginning to take place in manufacturing and exports.”—[Official Report, 9 June 2011; Vol. 529, c. 276.]

Given that figures from the Office for National Statistics confirm that manufacturing output fell last quarter and given that yesterday’s CBI industrial trends survey showed sentiment from manufacturers deteriorating, order books emptying and export prospects sharply declining for a second successive quarter, will the Minister update his assessment of four months ago? Does he think that any aspect of Government policy needs to change to ensure that manufacturing drives forward economic recovery and growth?

Vince Cable:
The hon. Gentleman is right to say that business conditions are difficult, but over the last two years manufacturing has increased significantly faster than the rest of the economy, as have exports. That is the direction that we need to pursue. Given that manufacturing is predominately an export-based industry, he will understand that the difficulties facing our major export markets in the European Union are creating problems for manufacturers and manufacturing confidence, but we will hit our way through them.

Ian Swales (Redcar) (LD):
I thank the Secretary of State for visiting SABIC Petrochemicals in my constituency to hear about the cost issues for energy-intensive manufacturing industries. When can those industries expect an announcement about a mitigation package?

Vince Cable:
I think they expect an announcement very soon. The visit was extremely constructive, and my colleague and others have rightly emphasised to us that energy-intensive industries are a key part of manufacturing recovery. It would be totally counter-productive economically and environmentally if they were driven overseas. We are determined that that should not happen, and a package of measures will be announced soon.

Science Funding

3. Phil Wilson (Sedgefield) (Lab):
What recent assessment he has made of the level of science funding over the comprehensive spending review period. [76853]

The Minister for Universities and Science (Mr David Willetts):
Funding for science and research programmes has been protected with a flat cash ring-fenced settlement of £4.6 billion for each of the next four years. We can be proud of our scientific research, and that is why the coalition is backing it.

Phil Wilson:
Although I welcome the investment in the technology and innovation centres, one of which is in my constituency, will the Minister explain to the House why the Government have continued to cut the science budget by 12% overall when Germany, one of our main competitors, has increased its budget by 8%?

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Mr Willetts:
No party at the last election promised complete protection for the BIS budget. In fact, in its last economic statement in December 2009, the hon. Gentleman’s party committed itself to cutting £600 million from the higher education and science and research budgets. We, by contrast, are offering complete cash protection for that budget.

Dr Julian Huppert (Cambridge) (LD):
The scientists to whom I speak are concerned not only about the amount of money available now but about the levels of capital funding and the long-term security of funding running many years into the future. While I welcome the announcement of funding for companies such as Babraham, what assurances can the Minister provide that he will try to get more capital funding from the Treasury and to ensure good, long-term security so that scientists will know how much funding there will be for the next decade?

Mr Willetts:
Of course, we have been able in the past year to fund six of the eight capital projects that the science community identified as the most important. We think that that has been a considerable achievement in tough times, and we will continue to try to secure financing for other capital programmes in the future.

Chi Onwurah (Newcastle upon Tyne Central) (Lab):
The Secretary of State recently said that all long-term economic growth was linked to innovation, yet one year after he claimed to have protected the science budget, the independent Campaign for Science and Engineering has revealed that its budget has been slashed by 12%, as my hon. Friend the Member for Sedgefield (Phil Wilson) mentioned. The Minister’s own Department says that cuts to science will damage our world-leading position, yet businesses up and down the country are being denied the innovation support that they need, and the shambles in university funding makes it harder for universities to provide science places. If innovation is the engine of growth, why is the Secretary of State doing so much damage to it?

Mr Willetts:
We in the coalition are absolutely committed to the importance of science and research, and we are strengthening the links between science and research and the business community. We are also offering cash protection for the science budget across all main current expenditure, which the hon. Lady’s party never did in government. The very source that she has just cited, the Campaign for Science and Engineering, only a fortnight ago

“welcomed Chancellor George Osborne’s announcement that £195m of new investment will be spent on science and engineering.”

Exports

4. Pauline Latham (Mid Derbyshire) (Con):
What steps he is taking to promote British exports. [76854]

13. Alun Cairns (Vale of Glamorgan) (Con):
What steps he is taking to promote British exports. [76866]

The Secretary of State for Business, Innovation and Skills (Vince Cable):
My Department is supporting British exports through UK Trade & Investment. Its strategy, which was launched in May 2011, sets out

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plans to provide practical support to exporters over the next five years. I have undertaken a number of visits overseas to promote British business to countries including China, India, Brazil, Japan, South Korea, Turkey and Romania, and next week I shall be in south-east Asia promoting British trade.

Pauline Latham:
Britain is increasingly becoming a centre of excellence for high-tech, high-value manufacturing exports. In Derbyshire, we have some great high-tech exporters ranging from Rolls-Royce, which my right hon. Friend knows all about, to Pektron, an innovative, family-owned electronics manufacturer. What more can my right hon. Friend do to showcase those exceptional firms and remind people up and down the country and internationally that high-tech British goods are in demand everywhere, and that that needs to continue?

Vince Cable:
Yes, there are many successful British exporters. Over the past year, exports have grown on a year-to-year basis by about 9%. Where we have fallen down historically is that British small and medium-sized companies have not been as involved in exporting as the larger enterprises such as Rolls-Royce. One of the main commitments in the UKTI strategy is to concentrate help and resources on those companies, which would undoubtedly help the specialist company in my hon. Friend’s constituency.

Alun Cairns:
It is good to note that exports have risen to their highest level since records began, and I note the Government’s plans to double our exports to Brazil by 2015. Following the Foreign Affairs Select Committee report, what specific action is my right hon. Friend taking to help British exporters to overcome the language issues and bureaucratic barriers that might stand in the way of achieving that?

Vince Cable:
I went to Brazil precisely to answer that question. My hon. Friend is quite right to say that we are starting from a weak position. As a result of neglect in the past, Britain’s share of imports into Brazil is far lower than those of Germany, France and Italy, for example, and we must remedy that. We are putting in a major effort in Brazil, through UKTI, to capture some of the opportunities, particularly those that are arising from the expansion of the oil and gas industries there.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op):
The Secretary of State has mentioned some exotic locations, but he did not mention the fact that he came to Huddersfield two weeks ago. Did he learn from that visit that export manufacturing is at the heart of getting the biggest bang for our buck, and that manufacturing for export counts for more in regard to the balance of trade? He talks about innovation and universities, but we do not want just seven—we want 133 innovation units.

Vince Cable:
As a Yorkshireman myself, I would hesitate to call Huddersfield an overseas market, but it is certainly an outstanding centre of excellence. I enjoyed my visit there. We visited David Brown, one of the recipients of regional growth fund money and a very successful manufacturing exporter. I would also commend going further up the valley to Todmorden, where there is a brilliant British casting and forging company working flat out in our major export markets.

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Jonathan Edwards (Carmarthen East and Dinefwr) (PC):
UKTI has no presence in Wales, so what discussions has the right hon. Gentleman had with the Welsh Government to ensure that UKTI is doing its best to promote Welsh exports?

Vince Cable:
Of course the Welsh Government, as a devolved Government, have more responsibilities of their own in this field, but Wales is part of the UK and I will do my best to work with my Welsh Government colleagues to promote exports. I have already talked to the Secretary of State about getting more Welsh businesses represented on UKTI missions and on projects of that kind.

Regional Growth Fund

5. Ian Lavery (Wansbeck) (Lab):
What recent assessment he has made of the effectiveness of the regional growth fund. [76855]

The Secretary of State for Business, Innovation and Skills (Vince Cable):
In April we announced that 50 bids had been successful as part of round 1 of the regional growth fund, receiving a conditional allocation of £450 million, which will deliver 27,000 new or safeguarded jobs and close to 100,000 jobs in supply chains. More than half these projects have already started, and successful bidders will receive funding as due diligence is completed. Announcements on the second larger round are imminent.

Ian Lavery:
There have been conflicting reports about the Department’s performance on the regional growth fund and what has been settled as a result of it. Will the right hon. Gentleman tell us how many applications have come from Northumberland, how many of them have been successful and how many have received any form of payment to date?

Vince Cable:
I cannot tell him off the cuff how many companies in Northumberland have received regional growth fund money. I know that the north-east was the most substantial recipient in the first round. I believe that several—in fact, the majority—of those projects are proceeding, and they will create jobs in Northumberland.

Mr Richard Bacon (South Norfolk) (Con):
We in South Norfolk were very pleased to see the Secretary of State visiting Group Lotus, one of the country’s highest technology companies, which he described as “the best of British”. Does he agree that the regional growth fund would be seen as even more effective if Lotus’s high-quality bid were successful?

Vince Cable:
I think my colleague is disarmingly tempting me to commit some indiscretion here. I have been to Lotus, but we did not discuss the regional growth fund bid. It is an outstanding company, and I am certainly aware that it has put in a bid.

Mr Gordon Marsden (Blackpool South) (Lab):
Well, why do we not put the bunting out? Six months after 45 regional growth fund bids were submitted, only three have got the money, so there are only 42 to go. Perhaps the Secretary of State could tell us how many people in BIS it takes to change a light bulb. However, on 17 October,

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the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk) assured

The Times

that due diligence on the bids had taken an average of six weeks. These bids have all been waiting six months. Will the Secretary of State tell us when the bidders will get their promised money, as all these continued growth prospects have been put at risk because his Department has been asleep at the wheel?

Vince Cable:
I definitely think we should put the bunting out for the regional growth fund. As I explained in my first answer to this question, more than half of all these projects are now under way. Factories have been built; jobs have been created—that is what it is about. As was made clear at the outset and as Lord Heseltine made clear a few days ago, the release of funding is a later stage in the process when due diligence has been completed. Are the Labour Front-Bench team seriously arguing that we should dispense with controls over the spending of public money in the private sector? I know they did that in government, but we are not going to do it.

Manufacturing Skills

The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes):
We are promoting manufacturing skills with success. Provisional figures show substantial growth, with 47,020 apprenticeship programme starts in engineering and manufacturing technologies in 2010 alone. That is an increase of 20%. The development of advanced and higher level apprenticeships and the roll-out of the “see inside manufacturing” initiative will build on that success.

Stuart Andrew:
I congratulate my hon. Friend on the increase in the number of apprenticeships that was announced today, which demonstrates a real commitment on the part of the Government and employers to training the next generation. Companies such as ATB Morley, in my constituency, and Airedale International are crying out for a skilled work force. Will my hon. Friend elaborate on how apprenticeships can help to provide the training skills that such companies need?

Mr Hayes:
Apprenticeships are, of course, jobs. They give people a chance to learn in the workplace. They provide individuals with a chance to gain the skills that they need and that fuel social mobility, they provide companies with a chance to gain the skills that they need in order to prosper, and they provide Britain with a chance to become a more cohesive, successful and prosperous nation.

Jim Sheridan (Paisley and Renfrewshire North) (Lab):
When the Minister has a moment, will he reflect on early-day motion 2218, which seeks to expose six British construction companies that are threatening to tear up the national pay agreement for skilled electricians and thus trying to de-skill the construction industry? Perhaps in the fullness of time he will give us a written response expressing his view of those actions.

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Mr Hayes:
I should be happy to do that. The hon. Gentleman has made an interesting point, and I will certainly consider doing what he suggests. Moreover, I should be happy to meet him and anyone he wants to bring to my Department, with my officials, so that we can take the matter further.

BAE Systems

7. Andrew Stephenson (Pendle) (Con):
What steps his Department is taking in response to recent job losses announced by BAE Systems. [76859]

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk):
The Government’s first priority is to support the individuals whose jobs may be at risk. To that end, the Jobcentre Plus rapid response service is providing support, training and careers advice. The Government are also working with the Lancashire and the Humber local enterprise partnerships on two potential new enterprise zones to support local economies.

Andrew Stephenson:
What role does my hon. Friend think that group training associations can play in redeploying and supporting those who have lost their jobs? In Lancashire we have Training 2000, the biggest GTA in the country, which is already working closely with Rolls-Royce and other businesses that are currently recruiting.

Mr Prisk:
The Government greatly value the role of group training associations. They are crucial, which is why we are supporting them through the growth innovation fund. However, I note the individual case that my hon. Friend has raised.

Graham Jones (Hyndburn) (Lab):
What is the reason for the reversal of the decision on the Lancashire enterprise zones in September? In August a bid had been turned down, and job losses had been agreed by the Ministry of Defence in July. That sequence of events suggests that the MOD was not talking to BIS, and that BIS made a reckless decision in August which was overturned by the Treasury. Can the Minister explain?

Mr Prisk:
There was a real problem for the workers in that area, and we responded positively by providing the additional two enterprise zones. I hope the hon. Gentleman welcomes that.

Construction Industry

8. John Cryer (Leyton and Wanstead) (Lab):
What steps his Department is taking to support the construction industry. [76860]

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk):
The Government are acting positively to strengthen the industry by reform the planning system, modernising public sector procurement, and producing the first national infrastructure plan, which will unlock up to £200 billion of both public and private investment.

John Cryer:
Can we return to planet Earth? Since the election 65,000 jobs have gone in construction, no one is training apprentices, and public sector contracts have dried up. Do we not need a bit more action?

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Mr Prisk:
It is nice to have the hon. Gentleman back on planet Earth. It appears that he has been away from it for a long time. We have heard about the work that the Government are doing on apprenticeships, we have seen the investment in infrastructure, and there is a positive story to tell. Why cannot the Labour party understand that?

Simon Hughes (Bermondsey and Old Southwark) (LD):
Very much on planet Earth, there are many sites that are not being developed but could be. Will the Minister talk to his colleagues in the Department for Communities and Local Government and the Treasury to ensure that financial incentives are offered to the owners of sterile land so that it can return to use and be developed, thus providing jobs in the construction industry?

Mr Prisk:
My right hon. Friend has made an eminently sensible suggestion. This is why we are adopting a positive approach, and trying to ensure that when Departments have redundant land, we can return it to use.

Toby Perkins (Chesterfield) (Lab):
Britain’s construction industry needs a lion at the wheel, but instead we have a tortoise that is sitting still while building sites and people in our construction industry are made redundant. However, there is an alternative. The shadow Chancellor’s five-point plan will produce projects that will enable us to get the industry moving. For instance, a VAT cut to 5% on home improvements and repairs and maintenance is a targeted approach that is supported by the Federation of Small Businesses. Will the Government take serious action to get the construction industry moving?

Mr Prisk:
As I recall, the tortoise beat the hare.

Stem Cell Research

9. Graham Stringer (Blackley and Broughton) (Lab):
What steps he plans to take to protect stem cell research in the UK following the decision of the European Court of Justice to prohibit the patenting of inventions based on human stem cells; and if he will make a statement. [76862]

The Minister for Universities and Science (Mr David Willetts):
We are—[Interruption.] We are carefully considering the impact of the ruling—[Interruption.]

Mr Speaker:
Order. I think we have had enough references to animals. Let us now experience the product of one of the brains of the Minister.

Mr Willetts:
I will do my best, Mr Speaker.

As I was saying, we are carefully considering the impact of the ruling on current UK patent practice. The Technology Strategy Board currently funds 15 studies involving human stem cells, two of which use human embryonic stem cells. The TSB and the research councils will continue to support and fund research on stem cells from all sources, including embryonic.

Graham Stringer:
That was an interesting reply, because leading scientists in the field have called the decision everything from “devastating” to “appalling”. They believe this work will move to South Korea and Canada, and that potential cures for people suffering from

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degenerative diseases will be developed later, if they are developed at all. I simply do not understand the Minister’s answer, and I would like more details on how he is going to stop this work going abroad.

Mr Willetts:
I agree with the hon. Gentleman that this research is very important in tackling fundamental human illnesses such as Parkinson’s, and that is why we will continue to support it. We are assessing the implications of the ECJ ruling. It is important that stem cells can be derived in a variety of ways, and embryonic stem cells are only one source of stem cells. That is why we need more time to assess the implications of this judgment.

George Freeman (Mid Norfolk) (Con):
I am sure the Minister agrees that stem cell science is one of Britain’s great strengths. The feeling within the industry is that this Government are putting their money where their mouth is. In contrast to the accusations and nonsense coming from Opposition Members that we are not investing in science, the recent £195 million investment in graphene and supercomputing and the protection of the science budget amounts to a real growth strategy.

Mr Willetts:
We are totally committed to investing in life sciences in Britain, and let me give a practical example of how we can cut the burden of regulation to bring this industry forward: we have committed to reducing the time it takes to start a clinical trial from over 600 days—the period we inherited from the previous Government—to 70 days in future under us.

Dame Anne Begg (Aberdeen South) (Lab):
My understanding is that the Court’s judgment does not stop research into embryonic stem cells, but that it does mean that scientists will not be able to patent anything worth while, and that therefore the intellectual property is likely to go abroad, as my hon. Friend the Member for Blackley and Broughton (Graham Stringer) said. What are the Government going to do to stop that happening, because this research is vital for people with degenerative diseases?

Mr Willetts:
The hon. Lady is right: this is vital research. The crucial points, however, are that the research is taking place using stem cells from a range of sources, not just embryonic stem cells, and we are continuing to assess how much of the research and development that currently takes place in Britain would be affected by this judgment.

Entrepreneurship

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk):
The Government are committed to making the United Kingdom the best place in Europe to start, finance and grow a business. Steps being taken include boosting tax relief, getting the banks to increase lending to small firms and scrapping regulations from this Department alone that would have cost small and medium-sized enterprises more than £315 million every year.

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Stephen Lloyd:
I thank the Minister for his answer. It is clear that the Government are taking an active lead on growing and supporting our entrepreneurs. Will he therefore join me in supporting the Federation of Small Businesses in its fantastic real-life entrepreneur campaign, as that support will demonstrate yet again just how committed the coalition Government are to the entrepreneurial spirit in UK plc?

Mr Prisk:
Absolutely. That is an excellent campaign by the FSB, and it shows why we are focused on matters that concern those real-life entrepreneurs: cutting their costs; tackling red tape; and of course improving access to finance. There is a lot more to do, but they know that we are on their side.

Bill Esterson (Sefton Central) (Lab):
Another excellent campaign from the FSB and also the Federation of Master Builders is the “Cut the VAT” campaign, which supports a cut in VAT on home improvements to 5%. Such a move would also be good for entrepreneurs. Will the Minister support that campaign?

Mr Prisk:
We are doing a lot of things to help small businesses. I notice that, although the Labour party is now saying that such things should be done, in 13 years in government it did not do it. Why not?

Simon Kirby (Brighton, Kemptown) (Con):
I congratulate the Minister on all the help he is giving entrepreneurs. Could he find time in his busy schedule to visit the many entrepreneurs in Brighton and Hove?

Mr Prisk:
I will be delighted—my diary secretary may not be—to respond positively to my hon. Friend’s request.

Seaside Towns

11. Mr Adrian Sanders (Torbay) (LD):
What recent discussions he has had with the Chancellor of the Exchequer on support for seaside town economies. [76864]

The Minister of State, Department for Business, Innovation and Skills (Greg Clark):
My two Departments, the Department for Business, Innovation and Skills and the Department for Communities and Local Government, have regular discussions with the Treasury about support for economies. My hon. Friend will know that the Chief Secretary to the Treasury has announced the coastal communities fund, which will be available from April.

Mr Sanders:
Two Select Committee reports have identified that one of the main problems facing coastal communities is poor transport links. May I invite the Minister to visit the warm and welcoming English riviera to see the challenges and opportunities there, which could be fully addressed by better transport links?

Greg Clark:
A visit to the English riviera is an enticing invitation, and I will be delighted to go there. My hon. Friend is right to say that connectivity is a concern for all coastal communities, and I know that he is waiting

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for a decision on the south Devon link road. I cannot pre-empt that, but I think I will go by train this time to avoid any delays.

Alison Seabeck (Plymouth, Moor View) (Lab):
Will the right hon. Gentleman place in the Library a copy of the advice he received from BIS officials—not DCLG officials—on the historical disadvantages that seaside towns and cities face, particularly those relating to access and business failures? Clearly the advice was not forceful enough, because neither Torbay nor Plymouth was successful in this round of bids for local enterprise zones, as he well knows.

Greg Clark:
As the hon. Lady knows, we have had discussions about Plymouth. I very much hope that all the representatives of Plymouth will join in putting together an area to attract business that is very much in keeping with the enterprise zone proposal. Of course I will put together a package of the research and make it available to her.

Scientific Research

12. Jane Ellison (Battersea) (Con):
How much capital expenditure for scientific research his Department has allocated in 2011-12 to date. [76865]

The Minister for Universities and Science (Mr David Willetts):
I have recently announced that the Department will be investing an additional £145 million in high-performance computing. That brings the Department’s total capital spend in science and research to £793 million for 2011-12.

Jane Ellison:
I thank the Minister for that reply. Britain has always been great at discovering and inventing things, but we need to address how to commercialise some of that cutting-edge research. Will he therefore comment on what the Government are doing to ensure that we bring that research, and those discoveries and inventions, to market in the future?

Mr Willetts:
My hon. Friend is absolutely right, and that is why we are setting up the network of six technology and innovation centres. It is why we are particularly backing the campuses in Norwich, Babraham, Harwell and Daresbury, which bring together scientific research and business applications. It was also the reason for the investment of £50 million in the application of graphene to business purposes, which was announced only a few weeks ago.

Paul Blomfield (Sheffield Central) (Lab):
Does the Minister recognise the deep concern in our universities at the cutting back of their capital programme, in contrast with what is happening in other countries, which will put us at a significant competitive disadvantage?

Mr Willetts:
The figure that I just gave the House for capital spending on science and research is comparable with the figures for capital spending under the ring-fenced science budget under the previous Government. So, even in tough times, we are absolutely maintaining our commitment to investing in science.

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MPharm Qualification

16. Charlie Elphicke (Dover) (Con):
If he will consider changing the MPharm qualification from level 6 to level 7. [76869]

The Minister for Universities and Science (Mr David Willetts):
The Government do not determine the academic levels of higher education qualifications. The Higher Education Funding Council funds the MPharm as an undergraduate master's degree, to the benefit of 10,000 students a year who are entitled to teaching grants and student support.

Charlie Elphicke:
I thank the Minister for that answer. My constituent Louis Leir has done an undergraduate degree and wants to do a MPharm, but unfortunately it is classified as an undergraduate-level degree. He is therefore caught by the equivalent or lower qualifications —ELQ—policy and is unable to get help with tuition fees. Will Ministers give further considerations to the issues relating to master's level qualifications? The MPharm truly is one of those, as most of the House probably recognises.

Mr Willetts:
I congratulate my hon. Friend on his ingenuity in pursuing that constituency case, about which we have corresponded. Just as he was with the Pfizer case at Sandwich, he is a persistent hon. Member and I congratulate him on that. However, we believe that if we were to take the ingenious approach he proposes, it might mean that the 10,000 undergraduates currently benefiting from financial support lose it.

Apprentices

18. Mr Graham Stuart (Beverley and Holderness) (Con):
What assessment he has made of the difficulties faced by apprentices aged 19 and over in obtaining adequate funding for level 3 qualifications. [76871]

The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes):
The Government are investing significantly in adult apprenticeships, with earmarked investment of £679 million in 2011-12. We rely on employers coming forward to make places available and many more are doing so every day, week and month. There were 114,900 starts in 2010-11—nearly twice as many as in the previous year—for those aged over 19.

Mr Stuart:
The Minister not only champions apprenticeships but facilitates their delivery and I congratulate him on that. May I ask him to consider introducing a flexible three-year contract for young apprenticeships, with a break clause after year 2, so that there is an equalisation of funding for young apprenticeships on courses both before and after their 19th birthdays?

Mr Hayes:
Knowing my hon. Friend’s expertise and commitment to this subject, when I saw his question I spoke to my officials and got an interesting response from them. I think that if we better estimate at the outset people’s prospects of progression, we may well be able to take account of what my hon. Friend says. I invite him, as I did earlier, to come to the Department

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to talk that through and to see what changes we can make to remove any disincentives of the kind to which he refers.

Mr Russell Brown (Dumfries and Galloway) (Lab):
The construction industry, the manufacturing sector and apprenticeships all go hand in hand. Will the Minister confirm that the vast majority of the increase in apprenticeships in the past year has been in the over-25s category? Frankly, that is not doing enough to assist with the serious problem of youth unemployment.

Mr Hayes:
The hon. Gentleman is right that there has been a growth in over-25s apprenticeships and he will know that the previous Government commissioned the Leitch report, which said that that was exactly what we needed—to upskill and reskill the work force. Notwithstanding that, however, he will also know that there has been remarkable, unprecedented growth in 16 to 18 apprenticeships and in 19 to 24 apprenticeships over two years. Contrary to the complaints of the carpers and the cringers, the whiners and the whingers, the biggest proportion of growth has been at level 3—that is A-level equivalent.

Mr Speaker:
We always enjoy the lyricism of the Minister.

Sajid Javid (Bromsgrove) (Con):
Having recently served a one-year apprenticeship by the side of the Minister for Further Education, Skills and Lifelong Learning, I am not surprised by the excellent numbers that were released today on apprenticeships, as his dedication is second to none. May I ask him to say a word on the increase in level 3 apprenticeships, which are equivalent in qualification to A-levels?

Mr Hayes:
My hon. Friend has gone on to other, I am tempted to say greater, things since he served that apprenticeship, and he is right to draw attention once again to the increase at level 3, because there were those, largely drawn from the bourgeois left, who looked down their noses at practical learning and who thought that the most growth would be at level 2, but actually we have facilitated very substantial growth—over 60%—at level 3 as my hon. Friend says. It is a rosy day for the Government and, much more importantly, a rosy day for Britain.

Small Businesses

19. Robert Halfon (Harlow) (Con):
What steps he plans to take to reduce costs for small businesses. [76883]

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk):
In these rosy days, in addition to extending small business rate relief and reversing Labour’s planned rise in payroll taxes, we also intend to reduce the burden of financial accounting rules. That will save businesses up to £600 million, a third of which will benefit small and medium-sized enterprises.

Robert Halfon:
At a time when many small businesses are struggling to thrive in the economic climate, will my hon. Friend join the campaign of Harlow chamber of

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commerce and the Essex Federation of Small Businesses strongly to oppose the proposals of the Health and Safety Executive to charge £750-plus to inspect small businesses?

Mr Prisk:
I am very much aware of the consultation that the agency is undertaking on fees and other proposals, and I understand the concerns that my hon. Friend voices. Any fees, any proposals, need to be proportionate and reasonable.

Gordon Banks (Ochil and South Perthshire) (Lab):
Many small businesses in the construction sector would benefit from a cut in VAT to 5%, as has been raised. We heard the Minister’s response; he thinks we are wrong in calling for that. If he thinks we are wrong, does he think the Federation of Master Builders, the Builders Merchants Federation, British Precast and the Modern Masonry Alliance are wrong as well?

Mr Prisk:
The Labour party thought those organisations were wrong when it was in office. The party needs to realise that it cannot do one thing in government and say another in opposition. [Interruption.] That is its record.

Topical Questions

T1. [76872] Jake Berry (Rossendale and Darwen) (Con):
If he will make a statement on his departmental responsibilities.

The Secretary of State for Business, Innovation and Skills (Vince Cable):
My Department has a key role in supporting the rebalancing of the economy and business to deliver growth while increasing skills and learning.

Jake Berry:
I thank my right hon. Friend for that answer. I congratulate Ministers on the fantastic apprenticeship numbers that were announced today. With that and the rebalancing of our economy in mind, and given that in Rossendale and Darwen we have a manufacturing economy, can the Secretary of State tell the House how we are going to make it easier for employers in my constituency to take on new apprentices?

Vince Cable:
The hon. Gentleman is right to acknowledge the big increase in apprenticeships, and it is not simply quantity; it is also about quality. Some of the rapid growth that is taking place is in advanced apprenticeships, including in manufacturing, and we welcome that, but we do not accept that the status quo is adequate. We want to strip away some of the bureaucratic barriers that hinder companies, particularly small companies, and my colleagues are working on that.

Mr Chuka Umunna (Streatham) (Lab):
A few years ago, the Business Secretary was described by the Deputy Prime Minister as an “economic prophet”. So in January, when the Secretary of State told the House that

“…economic growth is now strong. It will become stronger as a result of the work that the Government are doing in stabilising finances”—[Official Report, 13 January 2011; Vol. 521, c. 429.]

we listened with interest. Given the performance of the economy since January, does the Business Secretary believe he has lived up to his billing?

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Vince Cable:
May I first warmly congratulate the hon. Gentleman on his rapid and considerable promotion? I will not tempt fate by hoping that he makes a success of it, but I none the less wish him well. Of course, one advantage that he has in coming into Parliament only very recently is that he is not personally responsible for some of the disasters that occurred under his predecessors. One of our problems is sorting out some of those disasters, not least of which are the massive deficit that we inherited, a broken banking system, large amounts of personal debt and a flat housing market. All those factors explain why it is now very difficult to launch into rapid growth, but we are putting in place the rebalancing of the economy and the financial discipline to make that feasible.

Mr Umunna:
I thank the Business Secretary for his kind words, but I wonder when he will take responsibility. In his first speech as Business Secretary, he described his Department as the “Department for economic growth”. The truth is that, under his leadership, it has been the Department for no growth. The economy has stagnated, unemployment has soared and confidence has nose-dived—and that is all before the effects of the eurozone crisis have been felt. Things would be very different if he changed his policy and adopted a proper plan for growth to get demand back again. In January, he thought his policies were working and it turns out he was wrong. He has described himself as a Keynesian, but Keynes famously said:

“When the facts change, I change my mind.”

Why will the Business Secretary not do the same?

Vince Cable:
Well, Keynes famously wrote in his well-publicised note to Franklin Roosevelt that probably the most useful thing that the Government could do in a depression was keep down long-term interest rates, and that is what this Government have done as a result of their fiscal prudence.

The hon. Gentleman says that we do not have the policies in place; we have two things in place. We have policies for financial stability, which we did not have when we inherited the economy; and on the other hand we have policies in place to rebalance the economy, to reinvent manufacturing, which was allowed to decline catastrophically under the previous Government, and to promote exports and business investment—things that were shamefully neglected when his colleagues were in government.

T2. [76873] Jane Ellison (Battersea) (Con):
The Mayor of London has had great success in growing the number of apprenticeships from the low base inherited from his Labour predecessor by requiring apprentices to be taken on as a condition of bids for public projects. Will the Minister look at whether that success could be built on and extended to national Government?

The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes):
My hon. Friend is absolutely right to draw attention to the remarkable figures in London. Of all the regions, London has seen the biggest proportionate growth in the number of apprenticeships, and I recently had a meeting in the Mayor’s office to discuss the subject. She is also right that there are things

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the Government can do to help, so we will look again at what can be done, based on the experience in London, to promote apprenticeships in the way she describes.

T4. [76875] Nic Dakin (Scunthorpe) (Lab):
In June, the Office of Fair Trading upheld the Which? super-complaint about card surcharges, agreeing that they pose significant detriment to consumers. When will the Government act to stop people being exploited in this way?

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):
I am grateful to the hon. Gentleman for his question. We are looking at the OFT’s powerful report and consulting colleagues in the Treasury, and we will come back to the House in due course.

T3. [76874] Michael Fallon (Sevenoaks) (Con):
In formulating his response to the Beecroft review, will the Secretary of State bear in mind the interests of hundreds of thousands of people who are currently locked out of the labour market, particularly youngsters who might well be prepared to waive some of the more generous job protection provisions in return for that vital first start?

Mr Davey:
My hon. Friend will know that the Chancellor has announced that we will move the period of unfair dismissal from one year to two years—I know that my hon. Friend welcomes that—which will deal with exactly the point he has made. He will also know that we have an employment law review and a red tape challenge to ensure that we have employment laws in this country that will make our labour market fair and efficient.

T5. [76876] Stella Creasy (Walthamstow) (Lab/Co-op):
What message do the Government think they are sending to the thousands of families in this country who are now struggling in debt as a result of payday loans, by allowing the legal loan sharks not only to advise them on employment law, but to swell their party coffers?

Mr Davey:
I was expecting the hon. Lady to thank the Government for putting forward an idea that she and other Members have been pressing on the Government: namely, to launch research on the impact of a cap on the total cost of credit. I am really rather disappointed in her.

T6. [76877] Margot James (Stourbridge) (Con):
My right hon. Friend will be aware of the Wilson review on the collaboration between industry and universities. I am currently working on a project in the west midlands with local business leaders and universities. Will he meet industrialists and me when the report is competed next year?

The Minister for Universities and Science (Mr David Willetts):
I would be happy to meet my hon. Friend, because she is absolutely right that one of our priorities is to ensure that the strength of our research base is fed through into stronger support for business and greater business investment, and we look forward to Sir Tim Wilson’s report.

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T7. [76879] Mark Hendrick (Preston) (Lab/Co-op):
The Secretary of State will be aware that Remploy businesses were set up across this country after the second world war to give work to disabled people returning from the war. Those businesses have gone on for decades and given great work to disabled people. Why are the Government going to axe the programme?

Vince Cable:
Certainly we should be doing all we can to support disabled workers. My understanding is that those decisions lie with the Department for Work and Pensions, but I would be happy to engage or help if there is a problem.

Nadhim Zahawi (Stratford-on-Avon) (Con):
UK Trade & Investment has just completed a trade mission to Iraq for the Erbil international trade fair, of which I was privileged to be a part. We had 86 businesses, companies and educationalists at the British pavilion at the trade fair, whereas three years ago we had only one. Will the Secretary of State join me in congratulating the UKTI team and our consul-general on their great work during the mission?

Vince Cable:
Yes. UKTI does an excellent job. Like all other parts of the Government, it is having to do more with less, but it does so through refocusing and strategy. I have not yet been to that country, but I look forward to doing so.

T8. [76881] Diana Johnson (Kingston upon Hull North) (Lab):
Does the Minister of State really think that sending a letter to Members whose constituents are affected by the potential redundancies at BAE Systems stating that those people could move to other parts of the country to get jobs shows any understanding of the regional economy and the need for skilled manufacturing jobs, particularly in the Humber area?

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk):
The letter sets out, first, help for those individuals on the ground at those sites. Secondly, it refers to making sure that by having the new talent retention service we do not lose those skills; and, thirdly, it refers to making sure that we put enterprise zones in place. I have to say that the response I have had from local people has been far more positive, sadly, than that of Labour Members.

Andrew George (St Ives) (LD):
Many of those who strongly support the Government’s policy to establish a grocery adjudicator to curb the bully-boy tactics of supermarkets will be concerned to ensure that it has the teeth to do the job. Will my hon. Friend the Minister take this opportunity to reassure those supporters of the Government’s policy that a supplier will not be required to take the risk of making a complaint in order to prompt an inquiry by the adjudicator?

Mr Davey:
I again pay tribute to my hon. Friend, because he has been a stalwart campaigner for that change. I am delighted that we were able to publish the draft Groceries Code Adjudicator Bill on 24 May, and that the Business, Innovation and Skills Committee’s report on it has welcomed our proposals. He will know that the proposal is unique, because it allows anonymous

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claims to be made to the adjudicator and for reports, of which the adjudicator will be able to take note, to be put into the public domain.

Mr William Bain (Glasgow North East) (Lab):
The Bank of England’s own data released last week indicate that lending by banks to small businesses fell by £2.5 billion in the three months to August. Was not the Secretary of State right to admit at last that the economy is in a far weaker state under this Government than it ever was in the last year under Labour?

Vince Cable:
That certainly is not the case, but the hon. Gentleman has a perfectly valid point in relation to bank lending. That is absolutely the case, and, as a result of the agreement that we have reached with the banks, they have—certainly in the first two quarters—achieved the gross lending objectives that we set them, but there is a lot more to do. Surveys show that a shortage of credit is a serious problem, and we have to continue to work with the banks and, where necessary, to require them to make credit available to the economy.

Greg Mulholland (Leeds North West) (LD):
Since December 2008, 3,218 tied pubs have closed and 425 free houses have opened, yet the British Beer and Pub Association, which speaks for pub companies, continues to mislead Ministers and MPs by stating that the opposite is actually the case. Do Ministers agree that this discredits the BBPA and also shows that the Government must stick to their commitment to act on the issue?

Mr Davey:
My hon. Friend has been a doughty campaigner on the subject, and he will know that the Business, Innovation and Skills Committee has just undertaken a report on all those issues. The Government are therefore considering it and will respond to it shortly. If I were tempted into replying to the details of his question, I would prejudice that response.

Valerie Vaz (Walsall South) (Lab):
Having withdrawn funding from the UK Resource Centre for Women in Science, Engineering and Technology, will the Secretary of State tell us which women’s organisations he has contacted to encourage women back into those under-represented areas?

Mr Willetts:
It is important that women are properly represented in engineering and science, and I discuss that issue with a range of groups, so I hope the hon. Lady will be encouraged by the fact that we have 26,000 STEMNET ambassadors. Already, we have 40% who are female, but obviously we need to be better.

Duncan Hames (Chippenham) (LD):
Next month should at last see meaningfully democratic elections in Egypt, but a new democratic Egypt faces a future hamstrung by debts from the Mubarak era. Will my right hon. Friend ask his officials to conduct an audit of the £100 million owed by Egypt to the Export Credits Guarantee Department?

Vince Cable:
As my hon. Friend knows, there is a mechanism for dealing with official debt, through the Paris Club, but I will certainly undertake to speak to my colleague, the Secretary of State for International Development, to ask what concessional assistance we

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are giving to Egypt. The matter does not directly bear on my Department, but I accept that there is a link with the promotion of trade.

Grahame M. Morris (Easington) (Lab):
Does the Business Secretary believe that tax evasion and tax avoidance is having a negative impact on economic growth?

Vince Cable:
Absolutely. I am resolute, and I hope that my colleagues on the Opposition Benches will work with me in combating both.

Dr Julian Huppert (Cambridge) (LD):
The Department for Business, Innovation and Skills is considering the creation of a public data corporation. Does the Minister accept that making public data openly available can facilitate innovation in more ways than can be easily anticipated, benefiting the economy and the country? Will he meet me and other campaigners to discuss the details of that further?

Mr Davey:
I am certainly very happy to meet my hon. Friend to discuss the issue. He is right to bring attention to this very important innovation by the Government to create something called a public data corporation, bringing together a number of key Government assets to ensure that they are managed efficiently and to put a greater amount of data into the public domain.

Chris Bryant (Rhondda) (Lab):
One of the Labour Government’s great successes was the introduction of

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the artist’s resale right. Since then, the art market has quadrupled, and hard-pressed artists have received £13 million. The derogation in awarding the artist’s resale right to the estate of dead artists lapses at the end of the year. Will the Secretary of State confirm that from January next year it will apply to the estate of deceased artists?

Vince Cable:
No, I cannot confirm that, but I will speak to my colleague at the Department for Culture, Media and Sport about the impact on the art market, and how we propose to proceed with that in the European Union.

Mr Marcus Jones (Nuneaton) (Con):
The success of apprenticeships is undoubtedly vital to future prosperity in areas such as the west midlands. Will my hon. Friend update the House on the progress of the apprenticeship programme in the west midlands region?

Mr Hayes:
I described this as a rosy day for Britain, and it is a rosy day for the west midlands too. The number of apprenticeship starts in the west midlands is up by more than a half on 2009-10, which is due in part to the advocacy of excellent Members of Parliament such as my hon. Friend.

Several hon. Membersrose—

Mr Speaker:
Order. We must press on because we have a hectic schedule today.

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Eurozone Crisis

11.31 am

The Chancellor of the Exchequer (Mr George Osborne):
I wanted to update the House as early as possible on developments in the eurozone overnight, and in the absence of the Prime Minister as he travels to the Commonwealth Heads of Government meeting, to report on the good progress made at yesterday’s European Council.

The crisis in the eurozone has caused instability in financial markets, has greatly undermined confidence around the world, and is having a chilling effect on economic growth in many countries, including our own. It is in our overwhelming national interest that a coherent, comprehensive and lasting solution to the eurozone’s problems is found, because the decisive resolution of this crisis would provide the single biggest boost to the British economy this autumn, and the break-up of the euro would be the single greatest threat to our prosperity.

Our view about how to solve the eurozone’s immediate problems has been clear, consistent and forcefully expressed. The Prime Minister, the Deputy Prime Minister and I have set it out to the House on a number of occasions: reinforcement, recapitalisation and resolution. First, eurozone member states need to reinforce their bail-out fund to create a firewall; secondly, weak European banks need to be recapitalised; and thirdly, the unsustainable position of Greece’s debts needs to be resolved. But if the solution is to last, as I said many months ago, members of the eurozone also need to address the logic of monetary union by pursuing greater fiscal integration within the eurozone, while at the same time we protect Britain’s interests.

We have to improve competitiveness: competitiveness in the peripheral economies of the eurozone as measured against the core economies such as Germany, and competitiveness across the whole European continent versus the rest of the world. This is the solution of the crisis that we have been advocating for months, and the solution again advocated by the Prime Minister at yesterday’s European Council.

Our view is that last night very good progress was made towards solving the immediate crisis—very good progress on all fronts. The deal put together is much better than was expected yesterday afternoon. But much detail remains unresolved, and having put pressure on the eurozone to get this far, we have to keep up the pressure to get the details completed. It has started down the right road; now it must finish the job.

Let me take each element of last night’s deal in turn and say how it affects Britain. First, on recapitalising banks, we are pleased that the European Council agreed to the proposal hammered out by myself and other Finance Ministers at the weekend ECOFIN. All major European banks will be required to hold at least a 9% core tier 1 capital ratio by the end of June next year, including marking to market all their exposure to sovereign debt. The European Banking Authority, based here in London, assessed that achieving this target means that banks will require an extra €106 billion of capital, and the Council yesterday confirmed that if this cannot be raised privately, Governments will have to step up to the plate.

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I can confirm to the House today that in the assessment of the European Banking Authority and our own tripartite authorities, no British bank requires additional capital. This is an important expression of confidence in this country’s banking system at a time of global financial stress. EU member states also agreed to co-ordinate guarantees of term funding, should they be required, and we have ensured that state aid rules will be applied properly, and European banks will be restructured if necessary, just as the European Commission demanded of the last British Government two years ago.

While some would have wanted an even tougher banking agreement, and even more capital going into Europe’s weak banks, we should welcome what has been achieved with this agreement. We now have—unlike the totally inadequate stress tests of last year—a commitment to significant extra resources for the European banking system. However, the UK and others insisted that that commitment from the whole of the European Union on banking be conditional on the two other key components of the solution to the crisis that I set out: a reinforced firewall and a resolution of Greek debt. These are both properly matters for the Eurozone, not the UK—and they are both matters on which progress was also made last night.

On Greece, a headline agreement was reached to reduce the Greek debt-to-GDP ratio to 120% by 2020. The eurozone will contribute an additional €30 billion. Because the British Government have made sure that we are not part of the Greek bail-out, none of that extra €30 billion will come from our taxpayers, while private holders of Greek sovereign debt will be asked to accept a nominal write-down of 50%. A lot more work is needed to put all this into practice, including detailed negotiations with the private sector—but we said that Greece’s debts were unsustainable, and we are pleased to see a resolution in sight.

On reinforcing the size of the firewall, the eurozone has set out two options that could operate in tandem. One is to provide, from the bail-out fund, insurance on new debt issued by Eurozone countries; the second is to create special purpose vehicles that can attract resources from private and public investors. In its statement, the eurozone said that

“the leverage effect of both options will vary”

but that they could be

“expected to yield around 1 trillion euro”.

We have always believed that the role of the European Central Bank is critical, and I welcome the positive statement made by Mario Draghi, the incoming ECB president.

Talk of special purpose vehicles has given rise to questions about the involvement of the International Monetary Fund and major shareholders such as the UK. As I have said to the House on many occasions, Britain has always been one of the IMF’s largest shareholders and biggest supporters: we helped to create the institution 60 years ago; the last Government agreed to increase its resources two years ago; and this Government not only ratified that agreement but helped to make the IMF more representative of the new world economy by brokering a deal last year that gave countries such as China and Brazil a greater say, while securing Britain’s seat on the board. The IMF has been an active participant in the packages put together to support Ireland, Portugal

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and Greece. It has also been active in extending flexible credit lines to Poland and Mexico—neither of which is in the eurozone, of course—as well as supporting other countries in central and eastern Europe such as Hungary, Romania and Latvia. Indeed, it currently has 53 lending programmes around the world, of which only three are in the eurozone.

Supporting countries that cannot support themselves is what the IMF exists to do, and there may well be a case for further increasing the resources of the IMF to keep pace with the size of the global economy. Britain, as a founding and permanent member of its governing board, stands ready to consider the case for further resources and contribute, with other countries, if necessary. Let us remember that support for the IMF does not add to our debt or deficit, and that no-one who has ever provided money to the IMF has ever lost that money. But let me be very clear: we are prepared to see an increase only in the resources that the IMF makes available to all the countries of the world. We would not be prepared to see IMF resources reserved for use only by the eurozone. By all means the IMF can use its expertise and advice to help the eurozone to create the special purpose vehicle that it is considering. By all means let countries with large foreign currency reserves such as China consider putting their own money into the eurozone’s special purpose vehicle—that must be their decision—but the IMF cannot put its own resources in; it can lend only to countries with a programme for adjustment.

I confirm today that Britain will not put its resources in either. We do not have a surplus; we have a large deficit. We have had to use our resources to recapitalise our banks and to stand behind our currency. An active member of the IMF? Yes. Helping the IMF with advice and technical support? Yes. But the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.

We expect eurozone members to use the next few days—the next few weeks, at the most—to provide much more detail about their plans to increase their firewalls and sort out Greek debt. We have made it clear that the sooner that happens, the better it will be for the world economy. We must maintain the momentum.

This package will not on its own resolve the longer-term issues of how to make the euro work more effectively. Those longer-term issues were addressed yesterday, and there were proposals for greater fiscal integration and mutual control over the budget policies of eurozone Governments. I have argued that we need to follow the remorseless logic of monetary union, and that involves a loss of national sovereignty for countries in the eurozone.

It is in Britain’s interest that the euro operates more effectively, provided that the interests of all 27 member states are properly protected in key areas of European policy, such as the single market, competition and financial services. We are insistent that our voice will continue to be heard and our national interests protected. We have found allies among the other 10 members of the EU that are not in the euro. An important marker was put down in Sunday’s European Council conclusions.

No one pretends that sorting out this situation in a satisfactory way will be easy, but it is a necessity. That is the context in which we should approach potential treaty changes. The coalition Government have already

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proved that they can protect Britain’s interests by getting us out of the previous Government’s involvement in the eurozone bail-outs, holding down the European Union budget increases, and putting into law the guarantee that no further powers or competencies can be transferred to Brussels without the consent of the British people in a referendum. The Government will again protect Britain’s interests as the discussions on a possible limited treaty change begin. We will seek to rebalance the responsibilities between the EU and its member states, which in our view have become unbalanced.

Finally, the euro will not find lasting stability until its peripheral members become more competitive. That means credible plans to reduce budget deficits. That commitment was made in the very first section of yesterday’s agreement. However, that involves difficult decisions on pension ages, business tax rates, welfare reform and educational standards. Britain, thankfully, is not in the euro, but we are taking those difficult decisions at home, because the ultimate lesson of this crisis is that unless a country can pay its way in the world and compete around the globe, it will be next in the firing line. I am determined that our country will never be in the firing line.

Rachel Reeves (Leeds West) (Lab):
I thank the Chancellor for coming to the House to make that statement. With the shadow Chancellor in New York, I am responding on behalf of the Opposition, and I have a number of detailed questions. It is good that some agreement has been reached, but with so little detail, many unanswered questions remain. I hope that the Chancellor can help the House today, because whatever happens in the eurozone will have huge ramifications for British families and businesses.

First, on the recapitalisation of the banks, is the Chancellor confident that the deal announced is sufficient and that UK banks do not need further recapitalisation? Will he keep that under review? What estimates has he made of the exposure of UK banks to Greek, Italian, Portuguese and Spanish sovereign debt? Will he confirm that the House of Commons estimates of $3 billion for Greece and $17 billion for Italy reflect the current position for UK banks? Although the agreement states that banks and other creditors are invited to accept a 50% loss on Greek sovereign debt, is the Chancellor confident that the vast majority will agree—and if so, by when?

On the expansion of the European financial stability facility, does the Chancellor believe that the €1 trillion package is sufficient? Does it amount to the “big bazooka” that the Prime Minister talked about earlier this month? Alternatively, will we be back here in a few months’ time, which would mean further uncertainty, undermining confidence, undermining investment and undermining growth? That is the last thing that Britain, or Europe, needs.

Can the Chancellor explain how the leveraging of the EFSF will work, and when he believes the detail of credit enhancement and special purpose vehicles will be finalised? If the EFSF must also fund bank recapitalisation, will it be sufficient to give the markets confidence, and will there be funds remaining to underpin any sovereign debt crisis and prevent further contagion?

Although we have a clear economic interest in the eurozone sorting out its problems, the interests of British taxpayers must be safeguarded. It would have been

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wrong for Britain to pay twice, both through ongoing temporary EU bail-out funds and through the IMF. If this package is indeed the final and permanent bail-out fund, any British role should be through the IMF alone.

I heard the Chancellor’s question and answer session with himself on the IMF, but will he clarify what he said on the radio this morning? He said that the IMF was not

“going to put additional resources directly into the eurozone, hypothecated for the eurozone.”

Does he believe, though, that there will need to be a further increase in UK contributions to the IMF? Whether he succeeds in persuading it to describe that as anything other than a hypothecated fund is irrelevant.

On the arrangements for future decision making, the agreement states:

“The President of the Euro Summit will keep non euro-area member states closely informed of preparations and outcomes of summits.”

“Closely informed”? Has Britain now been reduced to simply receiving a postcard from Brussels? How will the Chancellor ensure that Britain’s voice, and our vital national interest, is heard loud and clear in future negotiations?

On the forthcoming treaty changes, will the Chancellor admit what the Prime Minister was unable to admit yesterday? Is it now the Government’s policy to seek to repatriate powers as part of those treaty changes? Which ones, and on what timetable?

Finally, is not the missing piece in the agreement the lack of any plan for jobs and growth, which were not mentioned at all in the Chancellor’s statement? Is it not the case that without growth we cannot solve the debt crisis, we cannot solve the banking crisis, and we cannot solve the jobs crisis? At this time, Britain should be leading the charge and pushing for a proper plan for jobs and growth across Europe. But is not the truth that this Chancellor cannot do that? With unemployment at a 17-year high here in Britain, with no growth since last autumn, and with borrowing therefore now set to be £46 billion higher than he planned, he is clinging to an austerity plan that is failing here in Britain.

With the UK economy flatlining since this time last year, before the eurozone crisis of recent months, and with only Greece and Portugal growing more slowly than Britain, is it not time that we had a plan for jobs and growth—across Europe, yes, but here in Britain too?

Mr Osborne:
I thank the hon. Lady for some of her questions. Of course, we miss the constructive and consensual approach of the shadow Chancellor. We are talking about the Bretton Woods institutions, and it turns out that he is at a place called Buttonwood, which adds to the pantomime feel of Labour’s economic policy.

Let me deal directly with the hon. Lady’s questions. First, of course we keep the capital and liquidity positions of the British banks under constant review. We would do that in the absence of any European agreement, but of course we have also participated in the recent work by the European Banking Authority. We thought it was important that that was done at EU level rather than eurozone level. I repeat what I said in my statement: the

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EBA and our own authorities confirm that no British bank requires additional capital, which of course is very good news for us all.

On the hon. Lady’s question about getting private sector involvement in the write-down of Greek debt, that is of course one of the key unresolved issues from last night. We now need to see whether the headline agreement reached on behalf of the private sector can be implemented in practice. I am confident that it can, but that is one of the crucial next steps that need to be got on with.

The hon. Lady asked about the exposure of the UK banking system and the UK economy to various peripheral economies of Europe. Those figures are published regularly by the Bank of England. I do not propose to repeat them today, but they are available for everyone to see.

On the question that the hon. Lady asked about the overall fund, €1 trillion is the number that the eurozone has put on its firewall. Of course, some said it should be larger, but it is very significantly larger than what we had yesterday, which we should welcome. As with private sector involvement in the Greek deal, we now need to see the details of how the eurozone will create that leverage. It has set out two options that can work side by side. One is a kind of first loss insurance on newly issued debt, and the second is the special purpose vehicle, by which it hopes to get external private sector investment. Of course, it is openly speculating about getting Chinese money into that.

The IMF can only lend directly to countries, and countries with programmes or agreed and negotiated flexible credit lines, which will remain the case. It cannot lend into that special purpose vehicle. That is also the UK position. We do not think that Britain, with its deficit, can contribute to the special purpose vehicle. If we were to do so, we would add to our debt, and we do not think that that is appropriate. We have had to use our own resources to deal with our own problems in this country.

It is of course crucial that the IMF remains a central economic institution in dealing with the world’s problems, and I urge the hon. Lady, newly appointed as shadow Chief Secretary, to reconsider Labour’s position—[Interruption.] I know that the hon. Member for Nottingham East (Chris Leslie) led the Labour party in Committee to vote against the increase in IMF resources, which the last Labour Prime Minister negotiated at the London 2009 summit. Whatever I have said about the right hon. Gentleman—and I have said quite a few things—I do not think that anyone would doubt that the highlight of his premiership was the negotiation of the London 2009 G20 deal. It is completely astonishing that the Labour party voted against that agreement.

As we discuss over the next few months increasing the IMF’s resources to deal with all the countries of the world, I urge Labour Members to reconsider their position on that, and also their rather odd position on the euro. They seem to be holding out membership of the euro—[Hon. Members: “No!”] Well, that is certainly what the Labour leader was doing at the weekend. To be in the euro but out of the IMF strikes me as a rather bizarre economic policy at the moment.

That brings me to my final point. Britain has been arguing consistently for months that a solution to this crisis requires recapitalising the banks, reinforcing the

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firewall and resolving the Greek crisis. We have insisted that the appropriate issues are discussed at the level of 27, which is why there have been two European Councils this week, and an ECOFIN. We will continue to argue for Britain’s national interest as we enter the difficult discussions ahead on the potential treaty change, on making the euro work, and above all on getting the growth and jobs that the hon. Lady talks about across Europe and in this country, by making this continent far more competitive and stopping Britain and Europe from pricing themselves out of the world economy.

Mr Andrew Tyrie (Chichester) (Con):
Following on from the Chancellor’s final remarks, I am sure he would agree that without a restoration of growth in the eurozone, the debt crisis simply cannot be resolved. He has been with his counterparts quite a lot in the past few days. What evidence has he seen in discussions with them that the EU has the will to implement the necessary reforms on the supply side of the economy to restore Europe’s global competitiveness?

Mr Osborne:
There is increasing evidence that people are focused on the structural issues facing the European economy. Indeed, when my hon. Friend looks at the agreement issued by the eurozone last night, he will see that when it refers to Spain and Italy, it stresses the importance not just of getting their budget deficits down, but of plans to increase the pension age and make labour legislation more flexible and competitive—all the sorts of things that this Government are pursuing here in Britain, although every one of those measures has been opposed by the Labour party.

Mr Alistair Darling (Edinburgh South West) (Lab):
Does the Chancellor agree that one reason why the bank recapitalisation worked three years ago was that we were able to provide precisely the sort of detail required to reassure markets that we were taking the necessary action? When can we expect to hear, for example, exactly how much Greek debt is to be written down, and which banks in continental Europe will require additional funds from Governments or other sources? When can we expect to hear more detail about the rescue fund? In relation to that, can he let us know whether there is a commitment on the part of the eurozone to provide real cash—or are we looking at a sophisticated financial instrument of the sort that might have contributed to the problems in the first place?

Mr Osborne:
I fear that we are looking at a sophisticated financial instrument here. However, it is clear that Germany and the Bundestag were not prepared to provide further resources. The European Central Bank was not prepared to provide those resources either, for all sorts of reasons to do with its history and those of other central banks in Europe. They have therefore turned to those options to try to leverage up the money they have already committed. That is the sensible choice for them, given those other constraints. They are trying to get other private investors from around the world, potentially including the involvement of sovereign wealth funds, to leverage up the fund.

Of course, I completely agree with the right hon. Gentleman that the sooner we get the agreement in detail, the better. That applies equally to what he said about private sector involvement in the Greek write-down.

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A mistake made earlier this year, on 21 July, was that eurozone members put together a deal and then took months to implement it and get the detail. He is completely right to say that yes, we made some good progress overnight, but the job is not finished yet. The eurozone now has to get the detail and reassure the markets that it has got a grip of the situation. That is where we will continue to exert British pressure.

Mr William Cash (Stone) (Con):
In what respects does the Chancellor believe, and can he demonstrate, that the proposals for a two-tier Europe and a fiscal union do not represent a constitutional, economic and political fundamental change in the relationship between the EU and ourselves?

Mr Osborne:
If my hon. Friend is referring, as I suspect he is, to the European Union Act 2011, there are clear procedures in place for establishing whether powers or competences are being transferred from the UK and this Parliament to Brussels. Those procedures are clearly set out, but I would say that it is in our interests that the euro works. That requires greater fiscal integration within the eurozone, which works to the benefit of Britain, provided that—this is an important proviso—we can continue to ensure that our voice is heard on issues that are for the 27 members, such as the single market, competition policy and financial services. That is what we will be fighting hard for in the coming months.

Kelvin Hopkins (Luton North) (Lab):
I remain wholly unconvinced that the euro can survive in its current form, unless the weaker countries are permitted to recreate their own currencies and devalue. They currently face permanent deflation and permanent handouts from Germany. That is no future for them, and no future for Europe.

Mr Osborne:
The hon. Gentleman has consistently made that argument for at least as long as I have been a Member of the House of Commons, and longer still. He probably takes some comfort in the fact that events over the past decade have tended to reinforce the views that he has expressed, but I would say this: it is in Britain’s interest that we make the euro work. The disorderly break-up of the euro, or any break-up of the euro, would be an enormous economic blow for this country. Forty per cent. of our trade is with the eurozone.

If we set aside the arguments that we will have this autumn and next year about the domestic effects of the Government’s policies—the Government will argue that they promote growth, and the Opposition will argue that they undermine it—everyone in the House would accept that instability in the eurozone has had a chilling effect on the British economy and other economies. If that is what a bit of instability and market volatility can create, let us just imagine what the break-up of the eurozone will do to this economy.

Michael Fallon (Sevenoaks) (Con):
Will my right hon. Friend explain to the House what the consequences would have been for our membership of the IMF if those who had voted against the increase in our subscription had prevailed?

Mr Osborne:
That would have been catastrophic. We would have been the only IMF shareholder not to have ratified the deal initiated at the London G20 summit, which would have completely isolated Britain. We might

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have had to leave the IMF, and we would certainly have lost our permanent seat on the board. We heard all the talk from the shadow Chief Secretary about ensuring that Britain is at the table—but she wants us to get up and leave the IMF table.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab):
In his statement, the Chancellor said, quite rightly, that the euro would not work unless the periphery countries regained their competitiveness. How is that possible if those countries do not have the full IMF package, including currency devaluation? In that context, does he think that the IMF will get its money back?

Mr Osborne:
It is perfectly possible for areas within a monetary union to increase their competitiveness relative to other areas in the union—parts of the United Kingdom and the United States have done so in the past 20 or 30 years. It is possible, but it is very hard work—I agree with the sentiment that the hon. Lady is expressing—and requires people to tackle tough issues, such as labour market reform, pension ages, tax rates and so on, which, of course, are controversial. However, people in countries such as Italy, Spain and Greece have been confronted with the reality of the need to make change—although we will see whether they do indeed undertake that change. The IMF is the guardian of its own programmes and makes constant assessments of its programmes in Ireland, Greece and Portugal. I do not want to be premature, but I think that we are seeing substantial improvement in the Irish economic performance after the difficult decisions that they have taken in that country.

Mr Douglas Carswell (Clacton) (Con):
The Foreign Secretary once described the euro as a “burning building”. Might it not be an idea for us to help our neighbours get out of the building? We know that there is always an exit from monetary union, so why not help our friends to get out? Keeping them in at any price is in neither their interests nor ours.

Mr Osborne:
My hon. Friend and I have discussed this matter before, and we disagree. What the Foreign Secretary said at the time—I remember because I was his speechwriter—[Interruption.] And there were some very good speeches at the time.

Chris Bryant (Rhondda) (Lab):
Didn’t he write any of his own speeches?

Mr Osborne:
They were all written by him.

The Foreign Secretary described the euro as a

“burning building with no exits”.

That was his point. As I said, the break-up of the euro, disorderly or otherwise, this autumn or in the foreseeable future, would cause enormous instability to the entire global economy and do enormous damage to the British economy.

Natascha Engel (North East Derbyshire) (Lab):
Will the Chancellor provide some clarification? He said that no UK funding would go to the euro bail-out. When he talked about supporting the IMF, therefore, did he mean with advice and suggestions only or is he using

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UK taxpayers’ money to support it? If the latter, how will he force the IMF to ring-fence the money so that it does not pay for a euro bail-out?

Mr Osborne:
Let me be clear to the hon. Lady. The IMF potentially has a role—but that is yet to be decided—in helping the eurozone to organise its special purpose vehicle, provide technical support and do all the things that it is very good at doing, which is stepping in and providing expertise. That is a perfectly legitimate role for the IMF. It has done it in other situations where trust funds and the like have been created around the world. However, we are saying that there should not be IMF resources going into this special purpose vehicle in terms of a lending programme. The IMF lends money to countries with conditions attached, and that is what it should do in the future. It is what its articles require it to do. We do not support, and I do not think that the IMF does either, changing those articles and allowing the IMF to lend money to the special purpose vehicle. We are against that and against Britain contributing to the special purpose vehicle, even if countries such as China or Chinese sovereign wealth funds do contribute.

Stephen Williams (Bristol West) (LD):
I welcome the Chancellor’s statement that resolving the immediate crisis in the eurozone and securing the long-term future of the euro currency are in Britain’s national interest. However, does he agree that it is also in Britain’s national interest to maintain full, positive and active engagement within the EU 27 member states in order to deepen the single market and increase intra-EU trade, which will benefit all member states?

Mr Osborne:
I absolutely agree that there is a very important role for the EU27 to strengthen and deepen the single market and to promote free trade—the EU has just concluded a free trade agreement with South Korea that benefits the British economy directly. Also, the EU will have an important role in things such as financial services regulation, and it is important that that is discussed at the level of the 27, because we are such an important player in the financial services industry worldwide. So I completely agree with the hon. Gentleman. Britain has been absolutely clear in recent months that issues affecting the 27 should be discussed by the 27, not at the level of the 17 euro members. It has been partly through our insistence, with others, that there have been two European Councils and an ECOFIN this week to ensure that proper procedures are followed.

Mike Gapes (Ilford South) (Lab/Co-op):
The Chancellor said that British interests should be properly protected when the eurozone countries move towards giving up national sovereignty and towards greater fiscal integration. Will he clarify how that will happen?

Mr Osborne:
This is the argument that we have to make over the coming months and as the discussions start on whether there is going to be a future treaty change—although what is being talked about is a treaty change of a limited nature. We have to look for ways of securing Britain’s influence and voice, and the influence and voice of the other nine EU member states that are not in the eurozone. That is absolutely top of our negotiating agenda. However, we also want to secure a rebalancing of the responsibilities between the EU and its member states, which will be another important part of the argument that we make.

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Mr David Nuttall (Bury North) (Con):
Does my right hon. Friend agree that now that the 17 eurozone countries have established the precedent of holding their own euro summit and have created yet another president, the president of the euro group, there is a real danger that they will start to agree policies to suit themselves and then impose them on the other 10 EU countries that, thankfully, like the UK, have not adopted the euro?

Mr Osborne:
I agree with my hon. Friend that we have to be alert to the danger of the 17 eurozone members, which will have a qualified voting majority, caucusing on areas that are legitimately the preserve of the 27 member states. When this country, under the previous Government, allowed the eurogroup of Finance Ministers to be established and accepted that Britain would not be at that eurogroup, there was the fear that the eurogroup would caucus. That was one of the concerns of the then Government and Opposition. That actually has not happened. If anything, they have not co-ordinated and worked together closely enough over the past decade or so. However, he is absolutely right that we need to ensure that they do not caucus in the future in a way that undermines our voice and influence or that bounces all 27 member states. All member states not in the euro are alert to this challenge. Indeed, last night the Prime Minister had dinner with the Polish and Swedish Prime Ministers to discuss precisely that issue.

Mr Dave Watts (St Helens North) (Lab):
Will the Chancellor be crystal clear? Is he guaranteeing that no British money will be used for this bail-out directly, through the IMF or through any other vehicle?

Mr Osborne:
I can guarantee that British money is not going into the special purpose vehicle.

Mr Peter Bone (Wellingborough) (Con):
The Chancellor is absolutely right to say that a disorderly break-up of the euro would be a disaster, but given that the euro is going to break up, should we not take the advice of the hon. Member for Rhondda (Chris Bryant) and organise an orderly break up of the euro?

Chris Bryant:
That was not my advice.

Mr Osborne:
I do not think that the orderly break-up of the euro, even if it were desirable, which I am not saying it would be, could be done in a way that would not lead to a pretty disorderly impact on financial markets and the British economy.

Chris Bryant:
The hon. Member for Wellingborough (Mr Bone) is a very naughty boy and I shall see him afterwards.

Basically, Greece lied about its finances and Italy is probably still lying about its finances. It would have helped enormously had there been independent proper auditing of those countries’ finances. Many people opposed that when it was proposed, but surely we should be advocating it now. The danger for the Government is that it might apply to all 27 countries, not just the 17 eurozone members.

Mr Osborne:
Indeed. The statement talked about independent auditing of finance and independent growth figures on which to base fiscal projections, which is precisely what we have introduced in this country through the creation of the Office for Budget Responsibility.

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That will ensure that we do not get political pressure to alter the growth forecast of the type that the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), detailed in his recent autobiography.

Mr Robert Walter (North Dorset) (Con):
The 50% haircut has been described as a charge on the banks, but Greek sovereign debt is actually held by insurance companies, pension funds and hundreds of thousands of individual savers. Can my right hon. Friend tell us what is in the package—or what measures he thinks need to be taken—to restore confidence in the existing sovereign debt of the peripheral eurozone countries?

Mr Osborne:
My hon. Friend’s first point is a good one. The write-down of Greek debt ultimately has an impact on people who invest in Greek debt, either directly or—as is more likely for the general population of this country—through their pension funds and the like. Thankfully, British institutions were not that heavily exposed to the Greek banking system and economy, compared with other European countries such as France and Germany, but he is right that people will have taken losses. In Britain, the institutions that he mentioned all provisioned for Greek loss many months ago, so it will come as no shock to them. More broadly, he asked about confidence in the stock of debt, which is of course one of the challenges. The first loss guarantee that the agreement talks about is only for newly issued debt. We will have to see how the special purpose vehicle works as well, but in general, if there is confidence that there is a sufficient set of mechanisms in place to stand behind the euro and countries that are in trouble, that will also increase confidence in the stock of debt.

Tony Lloyd (Manchester Central) (Lab):
The Chancellor might be surprised to know that if limited treaty changes are necessary to set up the inner 17, there would be support from the Opposition Benches for the limited changes needed to protect Britain’s interests and for the capacity to build a coalition among the 10 non-eurozone members. However, a very real political question is whether the Chancellor and the Prime Minister will be able to withstand the pressure from their Back Benches for much more fundamental reform of the treaty.

Mr Osborne:
I would hope that we would persuade all parties in this House. There is certainly strong agreement on the Conservative Benches that we want to rebalance the responsibilities and repatriate some powers. The Liberal Democrats and the Liberal Democrat leader have talked about rebalancing responsibilities—he did so earlier this week. [Interruption.] The shadow Treasury Minister, the hon. Member for Nottingham East (Chris Leslie), seems to forget the position set out by his party leader this weekend. When he was asked whether he thought that Brussels had too much power, he said no. That is the official position of the Labour party going into these negotiations. I know that Opposition Members look pretty glum about it, but that is what the leader they chose—or rather, they did not choose—has done for them.

Mrs Eleanor Laing (Epping Forest) (Con):
Will the Chancellor explain to the House how it has come about that although the United Kingdom’s deficit this year is larger than Greece’s, our interest rates are similar to those in Germany?

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Mr Osborne:
My hon. Friend makes a good observation. Because of the credible fiscal plans that we have set out, we have secured confidence in Britain’s ability to pay its way in the world, taken our credit rating off negative watch, which is where it was at the time of the general election, and secured for our country record low interest rates. Those interest rates would be at risk if we pursued the policies advocated by the Opposition, which would also be a rather bizarre position to take into the European Council discussions, when right at the top of the agreement signed yesterday is the statement that countries need to pursue policies of

“fiscal consolidation and structural reforms.”

The Opposition have voted against every policy of fiscal consolidation and every policy of structural reform.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC):
Does the Chancellor think that the 50% haircut of Greek sovereign debt will be sufficient and does he expect that holders of Italian debt will also need a trip to the barber’s?

Mr Osborne:
We think 50% is a very good number. We had in mind somewhere around 50%, and we wondered whether that would be achievable. One of the pleasant surprises of last night was that it was achieved. It is only a headline agreement, and as the former Chancellor said earlier, it absolutely needs to be put into practice now if this deal is to mean anything. I think it is best for me to stick to talking just about Greece.

Joseph Johnson (Orpington) (Con):
RBS shares have jumped 7% this morning in response to the eurozone statement. Does the Chancellor share the markets’ view that British banks are sufficiently capitalised to withstand not just the haircut to Greek debt, but any other eventualities that might arise in the eurozone over the next few months?

Mr Osborne:
Yes, I am confident about that, which is also something that the Bank of England and the Financial Services Authority monitor carefully. The important thing about the test that the European Banking Authority applied was that it not only required banks to hold 9% core tier 1, but marked to market their sovereign debt exposures, which is something that the eurozone resisted for the last year and a half. Of course, the market has priced in some haircuts—to continue the barbershop analogy—of other sovereign debts. That does not mean that I think they will happen; they are what the market thinks will happen. The fact that we have now tested our banks against those marked to market on sovereign debt gives us confidence that the banking system in Britain can withstand whatever is thrown its way in the next couple of months.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op):
Something that I do not often discuss with people in the House is the fact that for some years the previous Prime Minister, Tony Blair, his Chancellor and I chaired the committee on preparations for the euro, on which the present Secretary of State for Business, Innovation and Skills served, so I have some experience in this area. The Governor of the Bank of England said that we were in the middle of the worst crisis in the history of the international economy, but when I listened to today’s

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statement, the Chancellor seemed to come across as extremely timid about this country’s role in meeting that challenge.

Mr Osborne:
I will have to thumb through the index of Peter Oborne’s book, “Guilty Men”, to see whether there is a reference to the hon. Gentleman. I will concede that there are a few references to some of my colleagues in that book, but I have a good alibi, which is that I was writing speeches for the Foreign Secretary at the time, making it clear what some of the problems were with the euro, and some of those problems have come to pass.

Chris Bryant:
Who wrote the speeches?

Mr Osborne:
As the Foreign Secretary used to say at the time, he wrote his own speeches, and I write my speeches today—and those who have written my speeches before me have got themselves into the House of Commons, which is a good thing.

The serious point that I would make to the hon. Member for Huddersfield (Mr Sheerman) is this. I completely reject his idea that Britain has been marginalised. We have actually insisted that such matters be discussed at the European Council and ECOFIN. A key component of today’s agreement is the banking package, which is the area where there is most detail. There was a 10-hour negotiation to achieve the banking package last Saturday which Britain was right at the heart of, so we are at the centre of things. I suspect that the hon. Gentleman agrees with me that his party’s Front-Bench policy to marginalise us from the IMF would also see us leaving that key negotiating table.

Mr Christopher Chope (Christchurch) (Con):
Can my right hon. Friend confirm that the proposals for a financial transaction tax are now dead in the water?

Mr Osborne:
I cannot confirm that they are dead in the water, because the eurozone is determined to pursue a financial transaction tax and talks about that in its statement. However, I can confirm to my hon. Friend that Britain will not accept a financial transaction tax at an EU27 level while other jurisdictions in the world do not impose one. We are not opposed to financial transaction taxes in principle—after all, we have stamp duty on shares in this country—but we will not have a financial transaction tax at a European Union level while countries such as America, China, Singapore and others do not have one. As their having one is a long way off, we will be waiting a long time—perhaps for ever—for a European Union financial transaction tax.

Mr Andrew Love (Edmonton) (Lab/Co-op):
Over the next few years we are likely to see the emergence of a two-speed Europe, with the Government—or parts of the Government—going in exactly the opposite direction. What can the Chancellor and the Prime Minister do to ensure that we are not locked out of the fundamental decisions that will be made?

Mr Osborne:
I just do not accept the premise behind the hon. Gentleman’s question. The coalition agreement explicitly states:

“We will ensure that there is no further transfer of sovereignty or powers over the course of the next Parliament. We will examine the balance of the EU’s existing competences”.

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The odd one out is the Labour party, which has set itself against taking any power from Brussels back to Britain. That is exactly what the Labour leader said this weekend when asked that question. I suggest that the hon. Gentleman use his lobbying efforts and his questions on his own party leader.

Mr John Baron (Basildon and Billericay) (Con):
I for one do not share the optimism that the latest package of measures will do the job, if only because it does not address the fundamental cause of the problem, which is a lack of competitiveness. Can the Chancellor assure the House and the country that, if there were to be a further downward leg to the crisis, Britain will not be called on in any way to help financially with any further rescue packages, whether through the IMF or not?

Mr Osborne:
As I have said to the House, Britain should not be part of eurozone bail-outs. We got ourselves out of—[Interruption.] I am answering the question. On coming to office, on the Sunday after the general election, the Labour Government committed us to being part of an EU bail-out of the eurozone. We have now got ourselves out of that, which is very important. We are also not contributing to the eurozone bail-out of Greece, which has just increased in size; nor are we going to contribute to any special purpose vehicle or fund that might be created. We are absolutely clear about that. When it comes to IMF resources, like every other country in the world that is a member of the IMF, including China, Thailand, Guatemala, the United States of America, Canada and Brazil, we of course contribute to its resources for the 53 programmes that it is currently carrying out across the world, and we will continue to do so. However, we are not prepared to see—and the articles of the IMF do not allow for—money from the IMF being put into a special purpose vehicle. So I think that the position is pretty clear.

Michael Connarty (Linlithgow and East Falkirk) (Lab):
I would think much more highly of the Chancellor if he would actually admit that one reason that the banking system in the UK is not under threat is because the last Government and the people of this country bailed out the banks.

The right hon. Gentleman will recall that, as Hansard will show, I asked him last time about the possibility that they would require a £2 trillion fund, which most economists say they will, and that the so-called haircut—more Sweeney Todd than Vidal Sassoon—would be 60%. Surely we must be in the IMF and involved in funding through the IMF; otherwise the big bazooka that the Prime Minister has talked about will say “Made in China”.

Mr Osborne:
I am happy to acknowledge that the previous Government recapitalised the British banks. They were obviously under enormous duress at the time—[Interruption.] It is simply not the case, as the hon. Member for Nottingham East has just suggested, that the Conservatives opposed that. We supported it at the time; indeed, we were advocating it in advance of it happening. However, I completely recognise that it was a difficult decision for the previous Government to take.

On the question of the size of the fund, of course there are those who would like it to be even larger. We should welcome the significant progress that has increased its size severalfold to, potentially, around €1 trillion,

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which is a significant sum. The hon. Member for Linlithgow and East Falkirk (Michael Connarty) also asked an interesting question about what was happening during our time as Members of Parliament to the balance of economic force and power in the world. I suspect that we are going to spend many years talking about that in the period ahead.

Several hon. Membersrose—

Mr Speaker:
Order. I am keen to accommodate the remaining colleagues who are seeking to catch my eye, but I must remind the House that there is a business statement to follow, and a significant debate thereafter. I am therefore looking for brevity.

Mr James Clappison (Hertsmere) (Con):
I welcome my right hon. Friend the Chancellor’s approach, including his recognition that the division of responsibilities between the EU and member states has become unbalanced. Does he agree that the new proposals for fiscal integration and mutual control in the eurozone do nothing to reduce the case for a rebalancing of those responsibilities?

Mr Osborne:
Yes, I think that I can agree with my hon. Friend.

Nick Smith (Blaenau Gwent) (Lab):
Can the Chancellor update us on the situation regarding Cypriot banks, with their many customers in the UK and their tie-in to the Greek economy?

Mr Osborne:
We keep under close surveillance not only British banks but the branches of Cypriot banks and the subsidiaries of other banks operating here in the UK. So we are closely monitoring the Cypriot banks, as we do with the other eurozone banks in Britain.

Ian Swales (Redcar) (LD):
Has the Chancellor seen any credible figures that show that Greece can solve its long-term deficit and debt problems and still remain in the eurozone?

Mr Osborne:
Yes, I think that there are plenty of things that Greece can do, which the Greek Government have already identified, to make itself much more competitive. It is coming from a long way behind, but it can do quite a lot in regard to its labour market, its pension ages, its tax rates and the like that would make it considerably more competitive than it is today.

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op):
Can the Chancellor please give us more details of how he intends to represent the UK’s interests, given that the eurozone countries have their own separate president and summits?

Mr Osborne:
Eurozone Finance Ministers’ meetings are already held every month—that was agreed by the previous Government—and there is now an agreement to hold two eurozone Heads of Government summits a year. There have been two this year already, but we should not regard that as a fundamental threat; we have to allow them to get together to better manage their own currency. We are, however, looking at proposals that have been put forward here for those summits to take place after the EU27 leaders gather, rather than before, so that we do not have any caucusing in advance of a meeting of the European Council.

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Dr Sarah Wollaston (Totnes) (Con):
How confident is my right hon. Friend that countries such as China will want to contribute to the special purpose vehicle, and what will happen if they do not?

Mr Osborne:
The short answer is that we will find out whether China wants to contribute. The President of France is speaking to the President of China today, and he will no doubt give us all an update following that conversation.

Mr Wayne David (Caerphilly) (Lab):
Much to the annoyance of some of his Back Benchers, the Chancellor supports greater fiscal integration within the eurozone, but what precisely does he mean by greater fiscal integration?

Mr Osborne:
I think that the hon. Gentleman is being a little unfair to Conservative Back Benchers. Actually, quite a lot of Eurosceptics would argue—as I would, as a Eurosceptic—that we always said that this would happen if we joined the single currency. We always said that it would result in losing national sovereignty, co-ordinating budget policies or giving away powers over budgets. That is one of the reasons that we did not want Britain to join; it is why we stayed out. Given that monetary union logic leads to greater fiscal integration, we should let that happen, because I think that it will make the euro work better. As I have said, however, Britain wants no part of it.

Robert Halfon (Harlow) (Con):
Harlow taxpayers will be very relieved that none of their hard-earned money is to be used to prop up failed socialist Governments in Europe. They will also want to be sure, however, that my right hon. Friend will do all that he can to repatriate powers from Europe, unlike Labour Members, who believe that everything in the EU garden is rosy.

Mr Osborne:
I absolutely agree with my hon. Friend that we are going to seek to rebalance those responsibilities. He also draws our attention to the fact that Greece and Spain are run by socialist Governments, but I do not want to intrude on their politics.

John Mann (Bassetlaw) (Lab):
Having just taken credit for letting Greece off half its debt at the expense of, among others, British pensioners, what provisions would the Chancellor advise British institutions to make in regard to Italian debt?

Mr Osborne:
I am not providing that advice across the Dispatch Box, but the Financial Services Authority, the Bank of England and the Treasury monitor British financial institutions to ensure that they are appropriately prepared for things that might happen. The European Banking Authority test that I have talked about takes into account a mark to market on the sovereign debt exposures of countries such as Italy and Spain.

Mr Rob Wilson (Reading East) (Con):
The Opposition have talked a lot about Britain’s marginalisation, so may I say that I welcome the fact that the Prime Minister attended yesterday’s meeting because I know that the Leader of the Opposition would much prefer President Sarkozy to represent this country? Will my right hon. Friend confirm that while he is Chancellor he will do everything he can to ensure that a British Prime Minister represents British interests in Europe?

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Mr Osborne:
I can just say yes to that.

Jonathan Ashworth (Leicester South) (Lab):
May I just press the Chancellor a little further on the Prime Minister’s desire to repatriate powers over employment and social policy? What discussions has he had so far with eurozone Finance Ministers on these matters and how many of them would he expect to support the Prime Minister’s position?

Mr Osborne:
The discussions on treaty change, which the Council conclusions on the eurozone mention, have only just begun, so I have not had those discussions.

Jason McCartney (Colne Valley) (Con):
Would my right hon. Friend anticipate how his international counterparts would have reacted at recent EU summits if he had argued that, as advocated by Labour Members, the UK should increase its borrowing by the end of this Parliament by up to £87 billion a year?

Mr Osborne:
We would, of course, have been laughed out of the summit. We would not even have been able to sign up to the Council’s conclusions. The Labour party policy has no plan to reduce the deficit—[Interruption.] Well, if there is a plan, let us hear it. Let us hear one example. The Labour party has no plan to reduce our deficit, which is higher than that of almost any of the countries we have talked about. It has a plan basically to pull us out of the International Monetary Fund and a plan to join the euro—such plans would be treated as slightly bizarre at some of these meetings.

Sheila Gilmore (Edinburgh East) (Lab):
More constituents have contacted me about the financial transaction tax than ever contacted me about Monday’s debate. They will be pleased to have heard the Chancellor say that he supports this in principle. Will he go to the G20 to argue vigorously in favour of this tax?

Mr Osborne:
What I would say about the financial transaction tax—[Interruption.] I am not sure that it is Labour policy. There is a debate about this tax, but attached to it is a serious red herring. People would like a financial transaction tax to be used to pay for the aid commitments into which big western countries entered. That is what all the non-governmental organisations that contacted the hon. Lady and others are arguing for. Britain is meeting its international aid commitments out of its own resources, and we do need a financial transaction tax across Europe for other countries to meet the aid commitments they entered into. When it comes to the principle of the financial transaction tax, one cannot oppose it, as we have a stamp duty on shares, but I would say that if we impose such a tax in Europe, all the business would disappear overnight to Hong Kong, Singapore and elsewhere. We know that because that is what happened when the United States imposed a form of transaction tax on the euro-dollar market—it moved to London—and when Sweden introduced a financial transaction tax in the early ’90s, its entire business moved to London almost immediately. We have many case-studies. I understand why people are emotive about this issue, but surely the question is, “Are you meeting your aid commitments?”—and this country is. We should all be proud of that.